2016 (10) TMI 1051 - AT - Income Tax

Transfer exigible to tax by reference to Section 2(47)(v) of the IT Act read with Section 53-A of the Transfer of Property Act 1882 - JDA entered by assessee - Whether there was grant and assignment of various rights in the property by the appellant alongwith handing over physical and vacant possession the same tantamount to transfer ? - Held that - Issue in dispute is squarely covered in favour of the assessee and against the Revenue by the decision of C.S. Atwal Versus The Commissioner of Income Tax Ludhiana and another 2015 (7) TMI 878 - PUNJAB that from the cumulative effect of the covenants contained in the JDA read with the registered special power of attorney dated 26.02.2007 it could not be held that the mandatory requirements of section 53A of the Transfer Act were complied with which stood incorporated in section 2(47)(v) and once that was so it could not be said that the assessees were liable to capital gain tax in respect of the remaining land which was not transferred by them to the developer/builder because of supervising event and not on account of any volition on their part; and that viewed from another angle it could not be said that any income chargeable to capital gains tax in respect of the remaining land had accrued or arisen to the assessee in the facts of the case. - Decided against revenue

Summary

Issues:
Appeal against deletion of addition on account of Long Term Capital Gains - Applicability of section 2(47)(ii) and (vi) of the Act - Judgment of Hon'ble Punjab & Haryana High Court - Exemption under Section 54F - Computation of capital gain - Possession under JDA - Compliance with section 53A of the Transfer Act.

Analysis:
The case involved two appeals by the Revenue against the deletion of an addition of Rs. 1,49,25,000 made by the Assessing Officer on account of Long Term Capital Gains for the assessment year 2008-09. The ld. CIT(A) allowed the appeal of the assessee based on the judgment of Hon'ble Punjab & Haryana High Court in a similar case. The key issue was the applicability of section 2(47)(ii) and (vi) of the Act in relation to the deletion of the addition. The Revenue contended that the ld. CIT(A) erred in not adjudicating on the crucial issue of the applicability of these sections. The ld. CIT(A) relied on the decision of the Hon'ble High Court, emphasizing the importance of possession under the Joint Development Agreement (JDA) and compliance with section 53A of the Transfer Act.

The assessee initially declared an income of Rs. 1,01,937, which was later revised to Rs. 26,89,150. The case was reopened based on information received from the CCIT, Ludhiana, leading to the calculation of capital gains on the sale of land at Rs. 1,75,12,213 by the AO. The ld. CIT(A) allowed the appeal of the assessee, citing relevant legal precedents and emphasizing that income tax cannot be levied on hypothetical income. The decision highlighted the importance of actual accrual and liability for taxability, ultimately leading to the deletion of the addition by the ld. CIT(A).

The Revenue, dissatisfied with the decision, appealed before the ITAT. The ITAT, after hearing the arguments of the ld. DR and noting the absence of representation from the assessee, upheld the decision of the ld. CIT(A) based on the judgment of the Hon'ble High Court of Punjab & Haryana. The ITAT emphasized the significance of possession under the JDA and the conditions precedent for applying section 53A of the Transfer Act. The ITAT concurred with the ld. CIT(A) in dismissing the appeals of the Revenue, as the facts of the present case aligned with the precedent set by the Hon'ble High Court.

In conclusion, the ITAT dismissed both appeals filed by the Revenue, upholding the decision of the ld. CIT(A) based on the judgment of the Hon'ble High Court of Punjab & Haryana. The case underscored the importance of legal interpretations regarding possession under JDAs and compliance with relevant provisions of the Transfer Act for determining capital gains tax liability.